(No. 62) (Approved January 4, 2003) AN ACT

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Oswald Eaton
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1 (H. B. 1818) (Conference) (No. 62) (Approved January 4, 2003) AN ACT To amend Act No. 143 of October 4, 2001, to add a new Section 2 exempting financial institutions from revenue tax concerning interest, charges and other income derived from loans for construction, rehabilitation or improvements to businesses exempt under Act No. 78 of December 10, 1993, as amended, and of financing or refinancing paradores (state run hotel) belonging to the Puerto Rican Inns Program, and to renumber Sections 2 and 3 as Sections 3 and 4, respectively. STATEMENT OF MOTIVES Through Act No. 143 of October 4, 2001, the Puerto Rican Legislature exempted financial institutions from paying revenue tax concerning charges received for issuing warranties covering payment of principal and interest on debt issued to finance tourist development projects. The development of the tourist industry is important for the economic growth of Puerto Rico. The 1993 Tourist Incentives Act, as amended, intend to foster the development of such industry in Puerto Rico through the concession of tax incentives to the private sector for the development and management of tourist properties. In spite of the tax incentives for the development of hotels and condo hotels in Puerto Rico,

2 the expected growth in the tourist industry segment has not materialized. One of the crucial elements for the development of tourist projects is, doubtlessly, the availability of financing, particularly from the private sector. Accordingly, we understand that the scope of Act No. 143 must be extended to exempt financial institutions from paying taxes with regard to income received by said financial institutions, concerning interest, charges, and other revenue received from financing, both temporary and permanent, the construction of hotels and the temporary financing for the construction of condo hotel projects. BE IT ENACTED BY THE LEGISLATURE OF PUERTO RICO: Section 1.- A new Section 2 is hereby added to Act No. 143 of October 4, 2001, to read as follows: Section 2.- Income from interest, charges and other revenue shall also be exempt from income tax as established by Act No. 120 of October 31, 1994, as amended, concerning: (a) Loans, both temporary and permanent, for the development, construction or rehabilitation, or improvements to businesses exempted under Act No. 78 of December 10, 1973, as amended, said loan being conditioned upon the funds being used in their totality for new economic development and not to refinance existing debt. (b) Financing, both temporary and permanent, for the development, construction and rehabilitation, or improvements concerning paradores belonging to the Paradores Program, as defined by Act No. 78 of December 10, 1993, as amended, or by Act No. 52 of June 2, 1983, including the refinancing of existing debt. (c) The loan must be granted directly to a business exempted under Law No. 78 of December 10, 1993, as amended. If the loan is granted to

3 an intermediary who, in turn, lends, or otherwise contributes the product of the loan to an exempted business, the loan to the intermediary does not constitute an eligible loan for the purpose of this Act. The exemptions foreseen in this Section shall only apply to loans granted on or after October 18, Said exemptions shall be additional to any other benefit established by any other applicable law. Section 2.- Section 2 of Act No. 143 of October 4, 2001, is hereby re-numbered as Section 3 and is amended to read as follows: Section 3.- For the sole purpose of assigning deductions on income exempted under Sections 1018, 1023 and 1024 of Act No. 120 of October 31, 1994, as amended, the interest, charges and other revenue contemplated in Sections 1 and 2 of this Act shall be treated as nonexempted. In addition, such interest, charges and other revenue shall not be considered as exempt interest for the purposes of Sections 1018, 1023 and 1024 of Act No. 120 of October 31, 1994, as amended. Section 3.- Section of Act No. 143 of October 4, 2001, is hereby renumbered as Section 4. Section 4.- Effectiveness.- This Act shall take effect immediately after its approval.

4 CERTIFICATION I hereby certify to the Secretary of State that the following Act No. 62 (H.B. 1818) ( Conference) of the 4 th Session of the 14 th Legislature of Puerto Rico: AN ACT to amend Act No. 143 of October 4, 2001, to add a new Section 2 exempting financial institutions from revenue tax concerning interest, charges and other income derived from loans for construction, rehabilitation or improvements to businesses exempt under Act No. 78 of December 10, 1993, as amended, and of financing or refinancing paradores (state run hotel) belonging to the Puerto Rican Inns Program, and to renumber Sections 2 and 3 as Sections 3 and 4, respectively, has been translated from Spanish to English and that the English version is correct. In San Juan, Puerto Rico, today 18 st of February of Elba Rosa Rodríguez-Fuentes Director

(No. 33) (Approved May 31, 2001) AN ACT

(S. B. 291) (No. 33) (Approved May 31, 2001) AN ACT To amend subsections (c) and (d) of Section 2 and line 1 of Section 12 of Act No. 44 of January 27, 2000, known as the Early Retirement Program for Teachers